Economic Growth and Environmental Degradation: A Cross Country Analysis

The study attempts to analyse the impact of different economic activities on environment and test the validity of environmental Kuznets Curve(EKC) for countries with different income groups by constructing an environmental degradation index measured in terms of carbon-dioxide(CO2), methane(CH4), nitrous-oxide(N2O) and other greenhouse gases(OGHG) emissions by countries across the world. The index is used as an indicator of environmental degradation. The study also measures efficiency of the countries for attaining maximum possible output with minimum possible emission and compares it with resource efficiency. Findings reveal that higher industrial share has positive impact on greenhouse gas emission while higher agricultural share has negative impact. The study shows N-shaped nature of EKC which implies that environmental degradation increases at a decreasing rate as economic activity increases; after reaching a maximum level of emission, environmental degradation decreases with further increase in economic activities upto certain level and finally it increases at an increasing rate. In this study, efficiency scores of the countries for producing an aggregate amount of goods and services by employing their available resources reveals that although the high income group countries are more efficient in attaining economic growth than other groups, however, these nations are least efficient in sustainable growth or eco-efficiency.